Question

Moerdyk Corporation's bonds have a 15-year maturity, a 7.25% coupon rate with semiannual payments, and a par value of $1,000. The interest rate is 5.00%, based on semiannual compounding. What is the bond's price

Answer 1

$1,235.47

Step-by-step explanation:

For computing the price of the bond, we have to applied the present value formula which is to be shown in the attachment below:

Given that,

Future value = $1,000

Rate of interest = 5% ÷ 2 = 2.5%

NPER = 15 years × 2 = 30 years

PMT = $1,000 × 7.25% ÷ 2 = $36.25

The formula is shown below:

= -PV(Rate;NPER;PMT;FV;type)

Now applying this formula in the spreadsheet, so the price of the bond is $1,235.47 would come